New research suggests that the average supermarket shopper is
willing to pay a premium price for locally produced foods, providing
some farmers an attractive option to enter a niche market that could
boost their revenues.

The study also showed that
shoppers at farm markets are willing to pay almost twice as much extra
as retail grocery shoppers for the same locally produced foods. Both
kinds of shoppers also will pay more for guaranteed fresh produce and
tend to favor buying food produced by small farms over what they
perceive as corporate operations, according to the study.

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“Our
conclusion is that if a farmer wants to consider producing food for
local distribution and marketing it locally, there are people who are
willing to pay more for it,” said Marvin Batte, a co-author of the study and the Fred N. VanBuren professor of agricultural, environmental and development economics at Ohio State University.
“We are not saying that we should be producing all of our foods
locally, just that this may be a viable, profitable activity for
farmers.”

And what’s good for farmers also benefits consumers in this case, said Batte, director of the research project.

“This
is an indication that certain groups out there value locally produced
food and if farmers deliver that, it makes these consumers happier, so
it’s good for them, too,” he said.

Most of the
survey was conducted in late 2005. Batte said the findings — and his
contention that not all food should be produced locally — still apply
today, even in the face of rising fuel and food prices. Many food crops
that thrive in specific types of climates cannot be efficiently and
affordably produced for local distribution elsewhere. And, he said,
those who buy local food to support nearby growers likely would be even
more motivated to lend that support in a flagging economy.

The
researchers surveyed shoppers at 17 Midwestern locations, including
seven retail grocery stores, six on-site farm markets and four farmers’
markets hosting sellers from multiple farms. The researchers used data
from 477 surveys.

The survey presented shoppers with two product options. Both were
baskets of strawberries, but they were presented under 80 combinations
of price, farm location and farm type. Some scenarios also included a
freshness guarantee. After presenting the options, the researchers
asked shoppers which basket of strawberries they would buy.

“Statistically,
we sorted out what explains each person choosing one basket over the
other. We were able to determine how important price was, how important
where the strawberries were produced was and whether the freshness
guarantee was a factor,” Batte said. “Basically what made the biggest
difference was local production.”

In the study, local production meant the berries were grown within Ohio.

The
average retail shopper was willing to pay 48 cents more for
strawberries produced locally, and shoppers at farm markets were
willing to pay 92 cents extra. With the base price for a quart of
berries set at $3, farm market shoppers were willing to pay almost a
third more for the local produce.

The freshness
guarantee also held meaning for shoppers. If shoppers were promised
fresh produce that was recently harvested, farm market shoppers were
willing to pay 73 cents extra and retail shoppers indicated they would
pay 54 cents more.

The researchers also tried to
test shopper interest in supporting small vs. large farms by naming one
fictional berry producer “Fred’s” and the other “Berries Inc.” Shoppers
in grocery stores were willing to pay 17 cents extra for a quart of
berries from Fred’s, and farm market shoppers were willing to pay 42
cents more for the perceived small-farm produce.

“We
suspected people who go to farmers’ markets go there for a reason,
because they are willing to pay more, hunt it down and travel there.
But we also found that the typical shopper in a retail grocery store is
willing to pay more, as well. And in fact, we’re seeing that grocery
stores are figuring this out by prominently labeling locally produced
food,” Batte said. “So we were trying to see if that group of people
who shop at retail groceries are willing to pay X amount, and determine
what that amount is.”

Though the study was
conducted in Ohio, Batte said the findings could easily extend to the
rest of the country. However, the definition of local would be likely
to differ in California, a large state with multiple growing regions,
and New England, where several small states are clustered closely
together.

“The shoppers are expected to be there in
each kind of shopping venue nationally, but ”local’ would need to be
defined more precisely for various regions,” Batte said.

Though
not all farmers would be able to set up a niche operation to grow and
sell their produce to nearby consumers, Batte said some smaller farm
owners could consider adding hand-harvested local production with the
expectation that they can charge a premium for that produce.

“Farmers
could actually be a little less efficient on the production side and
still be more profitable on the revenue side if they can capture that
premium price,” he said.